IMBA 520 Week 4

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IMBA 520 Week 4

• Managing Across Cultures
• and
• International Trade Finance

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From http//www.funny-funny-pictures.com ,
accessed Feb 9, 2004
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Today Culture Numbers

• Admin - Progress on project?
• Strategy versus tactics powerful thinking...
• How to use models and theories
• Managing across cultures continued...
• Review Trade barriers
• Foreign exchange (FX)
• FX risk management
• How international money flows happen
• Managing global cash flows
• Capital investment and foreign risk

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Strategy versus tactics

• What is strategy
• What are tactics
• Which is better?
• Why do we need both?
• How do you learn how to do them?

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What are these strategies or tactics?

• Preparing for an exam an hour before the exam.
• Changing your price when a competitor changes
  their price.
• Making a list of tasks to undertake to finish a
  project next week.
• Having a report ready before your boss asks for
  it.
• Working on your IMBA520 project 2-3 hours per
  week throughout the term.
• Trying to get Tiffany to accept a late
  assignment.

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How to use models theories

• Practical example
• What is a model or theory?
• What is this when written by a student in a case
  study, project or thesis
• Michael Porters 5 forces model is about the
  five forces that affect an industry. The five
  forces areThe 5 forces model was created and
  used by Michael Porter to(Blanchard 2001).
  (one page of this)

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Managing across culturesA real case

• Two expatriates living in Dubai were assigned to
  work together. On the first day of having to work
  together, Rafi Akhtar refused to work with
  Arundhati Siddhartha.I wont work with her he
  yelled and then he stormed out of the office.
• You are their manager. You are not from India,
  where these two are from. What do you do?

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What is culture?

• Learned, shared, transgenerational, symbolic,
  patterned, and adaptive.
• It is Language, religion, values and attitudes,
  customs and manners, material goods, aesthetics,
  education,
• It changes constantly.
• Too little change Unhealthy society Too
  controlled and tension underneath surface
• Too much change Anarchy Anything can happen
• Is a barometer of possible success in that
  country in which you wish to operate in.

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Source International Management Culture,
Strategy, and Beliefs Hodgetts and Luthans
2003, pg. 109.
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Beliefs and Behaviors

• Centralized vs. decentralized decision making
• Safety vs. risk
• Individual vs. group rewards
• Informal vs. formal procedures
• High vs. low organizational loyalty
• Cooperation vs. competition
• Short-term vs. long-term horizons
• Stability vs. innovation
• Relationship vs. Process vs. Goal orientations

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which lead to Cultural Dimensions

• Power distance
• Uncertainty avoidance
• Individualism
• Masculinity

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Source International Management Culture,
Strategy, and Beliefs Hodgetts and Luthans
2003, pg. 119.
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Source International Management Culture,
Strategy, and Beliefs Hodgetts and Luthans
2003, pg. 124.
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Impacts on how we manage and do business
internationally

• Our management style
• Work attitudes
• Achievement motivation
• Time and the future - temporalism
• Ethics

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10 things to do right for doing business
internationally

• World view - managers must be comfortable in the
  world arena.
• Develop integrated and innovative strategies
  that are hard to copy.
• Do it right Go big if strategy requires it.
• Technology innovation is now international
• Operate as if world is one large market.
• Adapt organizational structures to unique
  situations
• Monitor politics constantly
• Use international managers
• Use every possible people resource you can.
• Follow all marketing and operational best
  practices of home country.

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Impact of Culture on your Projects

• Decide if there are cultural aids or hindrances
  to the sale of your product or service in the
  country of your choice
• What about people? Send your own? Hire locally?
  For what roles?
• How do you customize your product/service and
  operation for the new operating environment?

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Trade and Trade Financing
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Trade Barriers

• Price-based barriers - tariffs.
• Quantity limits - quotas, embargos.
• International price fixing - cartels.
• Non-tariff barriers
• Rules, regulations, red tape
• Slow processing of import permits
• Quality standards that are hard to meet
• Buy local policy
• Financial limits
• Foreign investment controls

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Tariffs

• Tax on goods shipped internationally
• Import, export, transit
• Specific (Fixed), ad valorem (percentage)

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Non-Tarriff Barriers

• Quotas
• Buy national restrictions
• Customs valuations
• Technical barriers
• Antidumping legislation, subsidies, and
  countervailing duties
• Agricultural products
• Export restraints

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Oanda

• What is useful about this tool?
• 10 years ago, how did managers manage foreign
  exchange?
• What is the Big Mac index?

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Foreign Exchange

• Ping needs to transfer 40,000 to Germany for the
  payment of a piece of equipment, payment for
  which will be due in 30 days. She has U in her
  bank right now.
• She can do this now (spot market) at the
  current rate of 0.78852 for 1 U or in 30 days
  on the forward market at 0.78750.
• Why would she do this now rather than in 30 days?

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Calculating Annualized Premiums and Discounts of
forward FX transactions

• Annualized forward premium/discount
• ( ( Pf - Ps) / Ps) x n
• Pf 0.78750
• Ps 0.78852
• n number of periods per year (12 in this case)
• Answer -0.0155 or -1.5 forward discount
• She could also have bought an option

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How FX rates change

• Purchasing power parity - arbitrage
• Interest rates (and inflation)
• Confidence in a currency
• Political stability
• Economic stability
• Social stability
• Market manipulators
• Governments
• Speculators

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How money flows happen

• Direct trading of funds between banks, large
  companies, governments, and individuals
• Measured by BOP accounting system
• Problems occur when surpluses and deficits occur
  on a large scale.

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How we pay for and receive when doing business
internationally

• Which currency should we use?
• U is default, but also Euros or local currency
  if no controls and country is stable and you want
  to leave money in that country.
• When and how should we check credit?
• Always and regularly! How?
• Which form of payment should we use?
• (Next week)
• How do we arrange financing?
• Triad? OK. Elsewhere Risk, risk, risk. Use
  export development trade financing

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Next week...

• Organizing and Production Operations
• Reading this week Chapters 5, 6, 7